San-dro; a discussion of interest

II Oliver Hulback

SAN-DRO

A DISCUSSION OF INTEREST

BY

FRED'K R. BURCH

Neither a borrower nor a lender be."

— Hamlet.

OLIVER HULBACK

627 New York Block, Seattle, Washington

COPYRIGHTED 1915 By Frederick R. Burch Seattle, Wash.

0, >«

— ®I|p Author.

Chapter X

Condition of Labor — Money Does not Produce — Invested Dollars — Loaned Dollars — Wages Borrowed Money — Interest not Paid by Borrower — Railroads — Money Stored Labor — Stored Labor Paid for Never Bought — Pocket Knife.

Chapter XI

Usury — An Act Either a Crime or Not a Crime — Usury Law, Frauds — Bankers No Way Hampered — Golden Egg — Object of Law — Small Borrower on Short Loan.

Chapter XII

Modern Financing — A Prospect Discovered — Can Borrow Only — Mortgage Foreclosed — Property Taken — Same in All Business — Square Deal — Trusts Created by Banks — Suicide to Vote Bonds — A Hideous Monster — Money Evidence of Credit — "Foregoing" a Fallacy.

Chapter XIII

Wealth and Capital — Wealth and Poverty — Mysterious Force — Complex Exchange — Abuse of Money — Definitions of Wealth — Definitions of Capital — Money not Wealth — Cannot Be Capital — Gold and Silver not Wealth — Pebbles Are as Much So.

Chapter XIV

System in Action — Fundamental Principles — Consumer Must Pay Interest — Bonds Never Retired — Labor for Money Lender — Laborer Must Borrow Money to Pay Interest on Borrowed Debt — Competition Defeated — Depositor in Bank Pays Interest on Deposit — Railway, Tobacco, Steel Money — A Vampire — Hatchet.

Chapter XV

The Money Question — Refractory Malady — Over Production — Money Apprehended — Greenbacks — Free Silver — Symptoms — Treatment — Inflation — Contraction — Malady Keeps Breaking Out — Results — Milk and Squeeze — Confidence Game — Two Scales — Fishes — Stock Exchange.

Chapter XVI

Recapitulation and Remedy — Borrowing for Profit — Illustration — Verdict — Remedy — Prohibit Private Parties from Exacting Interest — All Banking and Money Lending To Be Done by Government — No Change in Business — No Confusion — Lincoln's Foresight.

X

Preface

HAVE for some time been deeply impressed with the idea that the abuse of money had a much closer connection with the cause of poverty and misery in the world than was generally understood. The wonderful earning power of an article, which, in itself, is useless to mankind, was a mystery to me.

During all this time I was fully occupied with the cares of my profession and the opportunity never presented itself wherein I could find time to reflect and reach a conclusion on the subject satisfactory to myself.

It was not until the year 1914, which I spent on an extended hunting trip in the Talkeetna Mountains, Alaska, that my ideas began to assume relative proportions and I began to perceive the true and the false use of money. From that remote distance, and in the quiet and impressive solitude of the mountains, the perspective of life and the true relations and duties of man to man are presented in a clearer and grander view.

It there occurred to me that people did not struggle for gold, in this world, but for the things which gold will buy. Accepting this as a logical fact, I could not understand why a man who had gold enough to buy all he and his family could use in a thousand years, if they lived that long, should still be striving for more. That man was either striving for some other than the legitimate use of gold i. e., to exchange it for wealth, or else he was demented. I had to dismiss the hypothesis of a mind diseased, for were that true, his friends would have taken him to an asylum. The only other alternative is that he was striving for gold for other than legitimate use; that is, an abuse thereof. The summit of his desires was emblazoned with the magic word, POWER.

This power is gained with gold, gold is gained with interest; more interest, more gold; more gold, more power; more power, more interest.

The greater the power to exact, the higher the interest rate exacted, and the greater the amount of gold, exactly.

The people's money is thus offered up as a sacrifice to the false god of power, and they themselves, compelled by law to follow it, find themselves dangling "twixt the devil and the deep blue sea." It gives them a feeling of "great unrest."

In the following pages I have attempted to explain how money is thus abused. I lay no claim to having exhausted the subject. If this modest attempt will actuate a more competent mind to investigation, it is all that is

, . , , THE AUTHOR.

asked by

SAN-DRO

A DISCUSSION OF INTEREST

Chapter I. The Origin Of Money

While living in a primitive condition human beings have no need of money. All commerce may be carried on in the same primitive way in which they live. It is natural and convenient to barter among themselves with the actual commodities at hand. Thus, one will have a fish and another will have a rabbit. It transpires that they are each fond of fish and rabbit and desire to have a little of each, rather than all one or the other. As a result they agree to exchange one-half a fish for one-half a rabbit and vice versa. Having done this, a transaction has been consummated in the world of commerce as full and complete as any which has ever heretofore or will ever hereafter be effected. The purchase of a battleship by one nation from another is no more a complete transaction than this.

This primitive method of carrying on commerce by the exchange of actual commodities can remain in its simplest form only so long as each member of society is an actual producer and simple and modest in his desires. Complex conditions, concerted action along special lines of endeavor, larger and more elaborate transactions in the world of commerce, multitudinous desires engendered by advancing civilization, all tend to make it impossible to carry on trade in this simple form; hence all nations have been called upon to invent and adopt means for simplifying commercial transactions.

Evidently one very simple, very natural and very complete method presented itself, for all nations perceived it and all nations have adopted it — Money.

By the use of this medium complex transactions are simplified. Suppose the man with one fish had a thousand fish, and the man with one rabbit had five hundred rabbits, and a third party had venison for exchange; and further suppose that the man with fish could not use rabbit, but wanted \enison, and that the man with rabbits could not use venison but wanted fish. This being the condition, it is evident that the man with rabbits could not get his supply of fish unless he first trade for venison. This is the beginning of that complex condition which grows more and more intricate till it becomes impossible to carry on commerce.

Money, then, is chosen as the medium to assist in these transactions as the natural, logical and complete solution of the problem.

This is the normal, complete, the one and only use of money. No other conditions called it into being and no conditions whatsoever have enlarged or detracted from its usefulness, nor in any way changed it from the simple meaning of its definition, "A medium of exchange." Yet by means strange and devious, money has become diverted from its natural and only use.

By a senseless course of reasoning, which has been permitted to control the minds of men, money has become an instrument of torture, the gyves ii nd fetters of the struggling masses, the supporting column of a system of slavery more universal and eminently more refined and genteel than ever did or ever will again obtain. A system which is leading the world directly to the brink of repudiation and war.

This result has been averted in the past solely on account of the vast ungarnered wealth of the world, assisted by the production of the metals, gold and silver, in sufficient quantities to, in a measure, satisfy the rapacious appetite of the monster. But when these sources of supply cease to respond and the monster turns its greedy eyes and poisonous fangs upon the people and begins to mercilessly devour their heart's blood, the conditions of which I speak will then be no mere theory, as most people are now prone to believe, but will become living, burning facts, and the world will awaken to a realization of their hideousness, just as it has awakened from other silly and unjust practices, which a benign aristocracy and hoary antiquity have conspired to foist upon society, by the grace of a short-sighted, penny wise and pound foolish public.

The abuses of the past, present and future all depend upon some method devised to compel the many to pay an unjust and unearned tribute to the few, aDd getting the method legalized.

The triumph of modern surgery is that the most difficult operation may be rendered painless. The patient when he "comes to" is fully aware of the fact that some important part of his physical structure is missing, but he does not know who did it nor how it was done. He realizes it was necessary and rests content.

So it is in the industrial world today. When the patient "comes too" at the end of each month, he is fully aware of the fact that the major part of the fruits of his labor has been amputated and is missing. He does not know who did it nor how it was done. But in this case he cannot rest content for he has a vivid conviction that the operation was unnecessary. It is this conviction which gives rise to that mysterious "spirit of unrest" which pervades the masses.

The world is seeking in divers directions for these surgeons, so stealthy and deft. They must be discovered, their methods exposed, and their "industry" rendered unprofitable. This is the one great problem of the day.

Chapter II. The Definitions Of Money

The definitions of money adopted by all modern political economists are:

First. Money is a medium of exchange.

Second. Money is the circulating medium.

Third. Money is the measure of value.

The first definition is the most nearly correct. It is, however, misleading as it would imply money to be an essential medium of exchange. This we have seen is not true in a simple transaction.

The second definition is meaningless.

The third definition is radically wrong, and acquiescence in its meaning is one of the causes of the erroneous conceptions of money, its uses and abuses.

The proper definition is: Money is an essential factor in the economical consummation of a complex exchange.

To perceive the error of the third definition one must have a correct conception of value, which will be treated hereafter.

My object in setting forth the above definitions is as much to note the sins of omission as commission. None of the above definitions, either oirectly or by implication, describes money as a commodity, an article of commerce to be bought and sold on the market as a profit producer.

None of the polictical economists, whose work it has been my pleasure to peruse, have in any way intimated that such a definition would be correct. Most of them are content with the simple phraseology that "Money is the medium of exchange." Webster defines it as "a medium of commerce."

The strange part of this is, that all the thinkers along these lines, notwithstanding their failure to define money as a profit producing commodity, promptly proceed to treat it as such and endeavor as a matter of course to apply to it all the laws relative thereto, and leave the reader to conclude that it is actually on a par with all other commodities.

Webster defines a commodity as "including everything movable that is bought and sold — goods, wares, merchandise, produce of land and manufactories, etc."

The definition of money, amplified, means the substance chosen for a medium to facilitate the interchanging of the above commodities.

If that medium should become one of the commodities, it must, as a matter of necessity, lose its identity as a medium of exchange. The assumption of such diametrically opposed characteristics is absolutely untenable, and when we further consider that money is by law made legal tender, which Webster defines as "that which the law authorizes to be tendered in payment of debts," it is all the more ridiculous to contemplate it as a commodity.

Chapter III. Value

A commodity has:

First. An intrinsic or real value.

Second. A market or profit producing value.

Third. A speculative value.

These differing values may be marshaled as past, present, and future values. We will consider them in their order.

A commodity has intrinsic or real value exactly in proportion to its service to mankind.

The essential demands of humanity are nourishment, shelter, raiment, and adornment. There are also numerous other demands more or less essential. The real value of any commodity then lies fairly within its ability to administer to some one or more of the above mentioned demands.

The measure of this real value is the cost of production.

The market value of the same commodity will be controlled by the law of supply and demand.

The measure of this value is the keenness of the demand.

Speculative value is what its name implies.

The measure of this value will be the same as the other two according to where it falls when put to use by mankind.

To illustrate these differing values I take the two commodities, wheat and diamonds. Wheat has a very high intrinsic value, as it is essential to meet the demand of mankind for nourishment. The measure of that value is the cost of production. Under normal conditions the supply equals the demand, so that the market value rarely goes much above the real value. Diamonds have a real value as they meet a demand of mankind for adornment, and the measure of that value is the cost of production. However, as the supply does not equal the demand, the market value soars far above the real value.

Thus far we have seen that money has no connection with value nor the treasure thereof. On the contrary, the commodity is the measure of the {i mount of money required to make an exchange for some other commodity.

Money is the medium which by law is made a compensating balance for the different values of commodities. It can in no way affect the value of an article, neither can it measure that value. Money is not called into the transaction until the value has been measured as above explained, and then only as a means of facilitating exchange by balancing the differing values. An instrument of mere convenience.

Gold and silver left to the same standards as other commodities would have the same proportionate values. The degree of their usefulness to humanity in places where adapted would be the factor determining their real value and the law of supply and demand would control their market \alue.

However, inasmuch as gold and silver have been adopted as money by law, that very fact removes them from the realm of other commodities and pives them an arbitrary value which they would not otherwise possess. This arbitrary value is not a real value, nor a market value, nor a speculative

IS

value. In short, it is no value at all, as that term is recognized in political economy. Gold and silver are assigned, by law, to perform a certain function; iron, paper, cloth or almost any substance would perform the same function, but gold and silver have been chosen as they are best adapted to the purpose.

The fiat of the government that money shall be legal tender, results necessarily in some fixed ratio between the amount of money in circulation and the commodities of exchange. Left to natural laws, they will adjust themselves as unerringly as water will seek its own level. The money of the world will always maintain the same proportion to any given commodity which that commodity holds to all other commodities. The amount of money expressed in the proportion is just adequate to compensate the value of that commodity.

We are still unable to detect any connection between money and the value of any commodity, neither do we perceive that money can in any way be the measure of that value.

It is but a simple factor of exchange. It is useless while lying idle. It is valuable only for what it will be taken in lieu of.

Left to a logical conclusion, the world would not be at fever heat to turn commodities into cash, but, to the contrary, it would be equally as anxious to change its valueless lieu, money, into commodities, as they are the only producers of profit. This being true, the active workers, laborers or thinkers, would be the possessors of true value, wealth, and their wares would be ever in demand. Money having no real value would pass freely to true commodities and the world would be immeasurably blessed thereby.

Neither gold, silver nor paper have any great value as a commodity. They neither clothe, shelter nor nourish mankind. The metals have some little use in the trades and arts, but the values engendered from these quarters ^. ould be no more than values relative to other values of other commodities in proportion to their respective uses to mankind. Nothing would or could carry this value beyond its true position as dictated by the rule of their usefulness.

Paper money has not even this showing of value. Left in the market £.s a simple commodity, owing to its uselessness, it never would nor could have any real value.

However, by law, the foregoing moneys have been decreed the balance in exchange. A mere incident of commerce. Not a commodity but a creature of commodities, a servling. The commodity is the master, the money nothing but a factor, subservient and responsive.

To perceive that money, of whatever nature, maintains its position by fiat of the law only, it is but necessary to observe that the metals, with some real value, are exactly on a par with paper, which has no real value, when both are used as money.

Money being held in lieu of commodities, while thus hoarded, is valueless. The natural and logical thing to do will be to exchange this unproductive lieu substance for some commodity, the usefulness of which will create a demand which leads on to profit.

This simple condition is easy of understanding, automatic in action, and satisfactory in results.

u

Money, in its proper sphere, can never fix, nor in any way affect, the value or a commodity. Under natural conditions the dog always wags the tail. This seems to be nature's law and the average human being is able to otse)ve it f,nd commend it. He is so sure this is correct that he would indignantly tcout any other hypothesis. Yet, in the commercial world, he will complacently stand by and see the very life shaken out of the dog by the tail, and will as indignantly scout any assertion that there is something wrong.

When value dictates to money, the dog is performing his proper function, but when money in any way dictates to value, something is wrong and the tail is wagging the dog.

If commodities and money were left in their proper spheres, i. e., the commodity, the real value and the producer of profit, and the money a mere lieu or factor of exchange with no real value and nonprofit producing; it does not require a very profound deduction to conclude that the commodity would be the thing of interest and the money a mere auxiliary thereof. Money would be seeking investment, there would be no incentive to hoard and withdraw from use.

Anyone with labor, or with a commodity as the result of his application, could find a ready market therefor. Money held in lieu, being profitless, vould readily find channels through which to flow in quest of profit producing commodities.

That this natural and logical condition does not exist is patent. That the dollar is king and master is evident to all. That money has acquired an unnatural value is apparent. Money has become the master, commodities servlings. To accomplish this, money must have met commodities in an open l^eld, with no favors and come off victor. It must have indeed become the commodity, the profit producer, and the commodity a mere incident, or, at best, a. very poor second.

This is exactly what has occurred: Money has been permitted to enter a perverted channel and become a profit producer, something entirely foreign to its original and only use.

•This new use, or abuse, of money brings its natural results. It is now to the interest of the profit seeker to hoard money, take it out of circulation, and bend his energies to the accumulation of cash, and to despise the production of useful commodities. The man who wins cash at a gaming table seemingly has done more for humanity than the man who raises wheat. The gambler has the master money, and the honest producer has the creature wheat.

Money held in lieu of any commodity cannot rise above that commodity, lr I sell one hundred bushels of wheat, a profit producing commodity, for cne hundred dollars of non-profit producing money, I will naturally hasten to reinvest my money in some other profit producing commodity, or to employ labor in some profit producing enterprise.

There would be no incentive to hoard money as its only sphere of uselulness is to assist in economically transacting business, changing one commodity for another. If this condition were permitted to exist, commodities and labor would always be in demand. Money would be constantly seeking to exchange itself for these articles.

However, this is not the case. The exact contrary exists. Money is in ■constant demand and labor and commodities are the suppliants at its gates.

As no effect can exist without a cause, there must be some cause for this wonderful effect. What is the cause which places the valueless substance money in command of the most essential commodities of life. Evidently it is because money, by an absurd custom, has been permitted to enter the realms of profit producing commodities. To be the victor in that held it must be the producer of the greatest profit.

This is easily accomplished as money is not produced by the people but by the government. Thus we have commodities produced by the peuple <.nd held in check by competition and other causes, in direct competition as profit producers with money, the product of the government, hence monopolistic, and with naught but a fiat value upon which to base its ability to create profit.

The magic wand which has most to do with this abortive condition is the fact that money is permitted to bear interest, i. e., reproduce itself without the application of labor, and this anomaly is made possible by the law -which makes money legal tender. The man with hoarded money can subsist indefinitely without your commodity, no matter what it may be. 1' you deal in flour, he can eat rice. If you deal in both flour and rice, he can eat oatmeal, and so on. But not so with his commodity. The law has made it the legal tender and as such there is no substitute. We must get his article and none other and get it quickly and at his price Our bills must all be met promptly with cash. True commodities have absolutely r;o chance.

Chapter IV. Money As A Profit Producer

We have seen that an article has real value just in proportion to its usefulness to mankind.

Wheat is one of the most indispensable of articles and one of the most useful. As long as the supply equals or exceeds the demand, the cost of production will be the measure of its value. When the demand exceeds the supply, the cost of production is out-distanced and a new factor enters the race, i. e., the keenness of the demand. The keener the demand the higher and higher mounts this new or market value. The higher it ascends the scale of this new or market value, the higher rank it takes in comparison with other commodities and the greater amount of money will be required to make an even balance with any other commodity, so that all commodities may float on an even keel upon the sea of commerce, as it were.

This added amount of money, or ballast, required by other articles to counterbalance the rising market value of the first, is what is known as profit.

Profit is the coveted goal of the entire commercial world, and the commodity which will yield the greatest profit is the one zealously and jealously embraced. This enviable position fluctuates from one commodity to another hence anyone of them may be in demand today and a begging tomorrow, which condition is governed entirely by the law of supply and demand.

All true commodities are produced by the people and are directly subject to the vicissitudes of the seasons, frosts, droughts, floods, and other causes such as fires, strikes and a multitude of constant perils. Money is a daily producer and free, or as nearly free from danger as human ingenuity can devise.

All true commodities stand as breastworks between borrowed money and loss. This is accomplished by the custom of insisting upon a safe margin of security on each and every loan. This gives borrowed money a glaring and unjust advantage when considered as a simple commodity.

What, then, is the subtle cause that permits this phenomenon to occur? Why does a useless article, i. e., an article with little or no real value, dominate all other commodities? It must be that it, in some strange way, has become the greatest profit producer. A creature of economical commerce, a mere incident in the exchange of commodities has become greater than its principal. What has heretofore been the object, is now the incident, and what has heretofore been the incident has now become the object.

An article of no real value competes with articles of the utmost value in the field of profit and maintains its position as victor by the absurd custom which prevails of making the articles of real value stand all losses, when losses are in order, and allowing them to participate in the profits to a relative degree only, when profits are in order. A strange and unjust result of warped reasoning on the part of the borrowers and pleasant platitudes on the part cf the lenders.

Any commodity which is assured of profit at a fixed time and at a fixed ratio is indeed fortunately circumstanced. Good fortune is not yet content, but provides that, should the tide turn against said commodity, it is safely buttressed behind all other classes of commodities to the extent of the margin of security, thereby placing those other commodities in the forefront of the continual strife against loss, to be first sacrificed should the tide be too strong. This, then, is the enviable position occupied by money.

Thus we have the unnatural condition of money, which is not a commodity, having lost that dignity when it was adopted as the medium of exchange, competing with all other commodities for profit. This abortive condition is not sufficient. As though in fear for this malignant interloper 'bat it may not hold its own, the unjust and unreasonable custom has become legalized by which this foreigner in the realms of profit is permitted to hide itself behind all other commodities when danger of loss threatens, and come to the front, urbane yet insolent, to claim the lion's share when profits are in sight.

Such a mean, contemptible condition cannot long survive when once the world is thoroughly awakened to its iniquity.

Were this injustice left to affect the original borrower alone, the masses would not have such great cause for complaint, but when we consider that the brunt of the evil effect is passed along to the struggling masses who da not and cannot borrow money, it is easily seen how unjust the system is.

A slave is one who is compelled to give the profits of his labor to another. By the present perverted use of money the same definition applies with equal force to all citizens of the world who are not in the money-lending class, and even they are victims of the same system only that their losses are more than balanced by their profits.

If common thievery were legalized there would be different degrees of ability and opportunity to steal. Some would lose more than they could steal, others could steal more than they would lose. The latter class would be looked upon as being eminently successful in business. Taking the entire transaction, to them, the game is profitable. But would that fact cause such a condition to be desired?

Money, fortified against loss and constantly attracting other money unto itself, is like a malignant cancer, incurable and constantly growing, a continuing drain upon and sapping of essential vitality till death is the inevitable end.

A reservoir with no outlet, not even natural evaporation, with innumerable streams feeding it, will, in time, become a dangerous flood. Water once gone by in one of those streams never comes back to replenish the source, and, in time, they cease to flow, and then what a demand will arise for the water impounded!

Chapter V. Money— The Method Of Its Perversion

Money is perverted from its original, natural and only use by virtue of the iact that it is permitted to enter the field of profit producing. This crime is accomplished by the simple custom of demanding interest.